ValuePickr Forum

The Thoughtful Investor- Basant Maheshwari

Recently I found this book and after reading it, I thought to share the book with you. The author is Basant Maheshwari, who runs the forum theequity.com I am very biased against the Indian books (may be an extension of MNC bias in investing) and never liked anyone expect probably Parag Parikh. However I really liked this book.The book does not propagate any new way of investing and is a close adaptation of Peter Lynch’s method of growth at reasonable price. Nevertheless the book is readable for various reasons.

The first reason is humbleness of the author. The author is very open in admitting mistakes, exposing his own stupidity… when I read him, I got a solace that I am not the only stupid investor on NSE.

“My early years were wasted in searching for low P/E stocks hitting 52 weeks low which was a classic way to lose capital.”

He has described his journey and has been bold enough to emphasize “looking for larger picture” rather than critical line by line analysis of balance sheet. He has also been bold enough to suggest judicious use of leverage etc. although I feel it may be dangerous for investor reading the first investment book. The author’s brute honesty, willingness to accept mistakes, humbleness and quest for knowledge is very evident in every chapter- probably these are the qualities which makes successful investors.

The author has been bold enough to use his own quotes, rather than borrowing cliches from somewhere else- and quotes are really funny. “An investor who regrets his misses is like a person who repents about every girl he saw but did not marry!”. “Identifying a great investment idea is as difficult as finding a right spouse- but after you have found on, it pays to stay on.”

The book is an easy read and useful at least you consolidate what you may be already knowing. I recommend this book to every investor.

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Spot On Rajesh,Also listen to the video on youtube on launch of this book.

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You should also go through his lecture at IIM Ranchi (available on youtube). I learnt the following from Mr. Basant Maheshwari:

  • Concentrated portfolio : He says since the money is limited with us, it’s important to have large % allocated to few stocks than to have minor % allocated to large number of stocks. I thought about this for quite some time and adapted it. If an stock with 10% allocation grows ten times, it doubles your portfolio (lets assume other stocks did not do anything on average). Given that ten baggers seldom happen in stock markets, a 10 bagger with 10% allocation is a wasted opportunity in my opinion. Rather if you have 3 stock with 33% allocation each, a ten bagger will grow your portfolio by 4 times. I see the following merit in this for a retail investor like me who do not have a large corpus (say > 1Cr) :
  1. Since the initial invested capital is limited, there is a need for portfolio to become large with the great performance of atleast 1 stock in the portfolio
  2. 12-18 months back, I used to have 10-11 stocks in my portfolio. This thought process helped me ruthlessly cut down on either the losers or where my conviction was not strong. Consequently, I am left with 3-4 stocks with highestconviction
  3. If you have 3-4 stocks in your portfolio, you become veryfocused. Now, your bar also rises. If you see a fifth stock, you ask a very honest question if it is better than the existing ones and more often than not I reject dabbling with stock outside my portfolio unless it is an extraordinary opportunity

This strategy seems to be working for me as of now. Lets see how it goes.

Regards,

Vijay

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True. I fully agree with his views on concentrated portfolio.

However I do keep a diversified portfolio- in fact more than diversified with around 20 stocks. The primary reason of mine portfolio is that it is almost fully into small cap/micro cap stocks, with a few into mid cap. The other reason is search for value, and value stocks by nature have some negative perception at the time of purchase and accumulation. The third reason is playing for a tailwind- and at any point of time we have expectation of more than a few tailwinds. … well apart from these reasons, I think I feel more comfortable in a more diversified portfolio- may be as an insurance against my own stupidity.

Still I think a concentrated portfolio can do extremely better if the bets are right and open to it if some opportunity comes. Occasionally some stock goes much high resulting into concentration, and I am comfortable with it.

Hi

I have grown my portfolio 6 times in last 3 years. I am in favour of 1 or 2 large bets in portfolio may be 20 to 30% however we need to assess market conditions. I started with 3 stocks with heavy concentration & by God’s grace ,out of 3 bets, one became a 6X & other 5x. Sold out 6X one & diversified in to sectors. However I invested at 2013 end which was excellent time & spotting multibagger was quiet easy. Year 2015, I decided to decide sectors for investing & choose infra, pharma, auto & Power , consumer durable, mid segment Pvt banks as major investment themes. All clicked. By Dec 15, by portfolio was running at 6X in 3 years. I had invested 30% in one company that doubled in one month, Overall portfolio gains of 20%, WOW. From Jan 16 to Oct 16, is worst period where I underperformed. All because power stocks took severe beating & I did not sellout at peak valuation. However got an opportunity to swap stocks in Nov 16 & sold out power infra & replaced with cement,. NBFC. I started with 3 stocks in 2013, now hold 17-18 stocks with different allocations. I am 42 rightnow & plan for financial retirement by 46-47. Rightniw I have 4 large bets at 10% which are natco, wockhardt,force motors & Sagar cement, 4 bets at 7% of portfolio, pricol, Kiri, Granules & Lloyd electric, 12 bets at 3-5% of PF, ujjivan, Satin, HSIL, SpiceJet, suven life, Lincoln, Gitanjali, SpiceJet, stylam, meghmani, virinchi tech. Will addup equitas Shortly. Have one long position in futures for DHFL

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My strategy is to add a new stock & increase or decrease in next 6 month’s as you know about your company. Saying is to invest in good balance sheet however I made most of my money from power stocks madhucon, bought at 10 rupees distress valuation, Gayatri project, 20 rupees sold 150. Housing finance & small banks like ujjivan & equitas are very good themes for 2017. HSIL might become a dark horse. Pharma is tageed as underperformer however I feel this will be winner in 3-4 years which will give multifold returns due to large scale of opportunities lies ahead. Recently joined valuepickr & a great fan of this forum.
Disclosure: am invested in all stocks mentioned

Is there any growth trigger awaiting in hsil ? If yes, then what it is ? … Please tell

When few smart investors are bearish on micro finance then what would be moat in ujjivan and equitas as cleaning up would result in slow growth. Suggestion as economy is moving from lending management to savings management worth looking at Insurance companies and broking companies. Also OEM would be big beneficiary of GST.

Don’t confuse Ujjivan & equitas as MFI, they are recategorized to small finance banks.

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Hsil has diversified into consumer durable like water heater,air purifier, air coolers, recently started cpvc pipes, margins were low n last 2 years due to capex. Company is focusing on debt reduction & growing consumer business. Expect 100% return in next 12-18 months

Hsil has grown its top line by 6.5 times since 2006 and bottom line by 6 times . At the same time period , they have been diluting the equity once in 4 years. In the long run, debt s far better than equity dilution.

What is your opinion on Meghmani now?
It’s not moving even after such a good results ?

Meghmani can be bought at current levels, don’t see any dip in business outlook except price detrioration. Added some more quantities to my holdings.
Disc: invested

I have read the book 2 times in the year 2018. Without any doubt, this is the best book on investing by an Indian author. It can compete for sure with the likes of Peter Lynch’s -One up on Wall street" and perhaps better than “5 rules for successful investing” by Pat Dorsey( this book theme is more or less similar like Mr Basant’s book).
There are very few investors who show courage to write the mistakes they have done in their investment career and how they evolved over time; and Mr Basant has mentioned the same with full integrity, honesty and truth.The 400 odd pages is a treat to read and each page delivers a deep message/learning. You will learn a) behavioral investing b)how to pick winners c) how to create a portfolio d) when/what to buy and sell d)different sectors- which ones to pick and avoid.
The best thing is all the examples are Indian so you will relate far more to yourself compared to Peter Lynch book.
Please do read this book to become a mature and peaceful investor. In todays noise, somehow this book did not find its deserving place and thats why surprising that in the thread, not many people contributed.

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fully agree. this book is a must read for indian investors. I used to desist from buying high P/E stocks till I began interacting with Basant on The Equity Desk and later with this book. Paying up, but not too much, for quality also gives one the conviction to hold during deep market corrections.

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